The road to financial freedom is long and winding. It necessitates a great deal of forethought and reflection. One of the most important things an investor can do is learn to set investment targets. Goal setting allows one to keep track of where one stands. The investment objectives aid in the development of your long-term financial strategy.
Evaluate your objectives before you begin your investment journey. This will assist you in scheduling and selecting the appropriate investments.
Improve current lifestyle or plan for your retirement. Goals can be short-term or long-term. If you don’t have a particular target in mind, set a budget and schedule. This will assist you in selecting investments that suit your lifestyle and goals. Make a list of your objectives and a concrete timeline for achieving them.
Your investment goals can be classified into three types – short-term, mid-term, and long-term. You need to define your goals and plan accordingly. You are more likely to spend more if you are not working toward any clear goals. Investments come with varying levels of risk and potential returns. Determining if your objectives can be met in the short or long-term will help you determine where to put your money.
Short-Term Financial Goals
Setting short-term financial goals is the first step to reach long-term investment goals. Planning short-term financial goals will give you self-assurance. It will also give you the experience you need to achieve longer-term financial goals. Choose short-term investment objectives based on your current lifestyle and spending capacity. For example, you may want to buy a new television set or a new laptop or plan a vacation.
Mid-Term Financial Goals
Mid-term goals could take a few years to achieve. These are a little more challenging than short-term goals. But these goals are still attainable with dedication and hard work. Winding up an ongoing loan, upgrading your existing home, or buying a new car, might be some examples of mid-term financial goals. If you have decided on one or more of these goals, start calculating how much money you will need to achieve them. The first step in reaching the desired future is to envision it.
Long-Term Financial Goals
Choose long-term investment goals that represent your future. This is where you consider putting money aside. This capital might finance a retirement, a new house, or children’s education and marriage. Don’t worry if your investment portfolio priorities appear to be in conflict. A diversified portfolio that helps you achieve multiple goals is part and parcel of financial planning.
Develop A Healthy Habit
Ideally, a part of your salary or any income should be allocated towards investments without a miss. Usually, people tend to spend first and invest what has left. But the process is in reverse for an investor. Ideally, they should invest a part of the income first and plan spending from the remaining amount.
A serious investor should cultivate a habit of allocating at least 25-30% of income towards investment. And the investment amount should keep increasing by 10-15% every year or, after a particular gap of time. These habits, cultivated over a long time, immensely help in staying ahead of the curve in managing financial needs. It also helps in achieving all your goals and managing all the responsibilities in an efficient manner.
You are unlikely to make perfect, linear progress against all your objectives. But consistency is more critical than perfection. Don’t pressurize yourself if you can’t contribute to a specific fund for a month or two because of an unforeseen emergency. It might happen that instead of contributing you may need to pull money out of it. And that’s completely fine. Simply get back in shape as soon as possible. That’s the strength of setting the right investment goals. You can revisit and refine your goals, as well as track your progress against them, as life unfolds. The little things you do regularly as well as the big things you do periodically – will all contribute to your financial goals. Take one step at a time!